Answer the following question(s)using the information below.Easy Fit Ltd.manufactures heating, ventilation, and air conditioning (HVAC)equipment.The Manufacturing Division creates parts; and, the Assembly Division builds and sells the equipment.The Manufacturing Division "sells" furnace parts packages to the Assembly Division.The market price for the Assembly Division to purchase a mini furnace is $3,500.The fixed costs for the Manufacturing Division are assumed to be the same over the range of 2,000-5,000 units.The fixed costs for the Assembly Division are assumed to be $40.00 per unit at 5,000 units.Manufacturing costs per furnace are:
Assembly's costs per completed furnace are:

-Which of the following is an advantage of an Advance Transfer Price Arrangement (APA)?
A)The Canadian Government provides APAs free of charge to promote Canadian exports.
B)APAs save company's from the cost of keeping related party transfer records.
C)They are always cost effective.
D)An APA can reduce or eliminate the opportunity cost associated with a Canada Revenue Agency transfer price audit.
E)An APA prevents companies from having to endure transfer price audits.

Question

Answer the following question(s)using the information below.Easy Fit Ltd.manufactures heating, ventilation, and air conditioning (HVAC)equipment.The Manufacturing Division creates parts; and, the Assembly Division builds and sells the equipment.The Manufacturing Division "sells" furnace parts packages to the Assembly Division.The market price for the Assembly Division to purchase a mini furnace is $3,500.The fixed costs for the Manufacturing Division are assumed to be the same over the range of 2,000-5,000 units.The fixed costs for the Assembly Division are assumed to be $40.00 per unit at 5,000 units.Manufacturing costs per furnace are:
  Assembly's costs per completed furnace are:
 
-Which of the following is an advantage of an Advance Transfer Price Arrangement (APA)?
A)The Canadian Government provides APAs free of charge to promote Canadian exports. 
B)APAs save company's from the cost of keeping related party transfer records. 
C)They are always cost effective. 
D)An APA can reduce or eliminate the opportunity cost associated with a Canada Revenue Agency transfer price audit. 
E)An APA prevents companies from having to endure transfer price audits.

Quizplus · Accepted Answer

An Advance Transfer Price Arrangement (APA) can reduce or eliminate the opportunity cost associated with a Canada Revenue Agency transfer price audit, as it provides certainty and agreement on transfer pricing methodologies between related parties. However, APAs are not always cost effective and do not eliminate the need for keeping related party transfer records. The Canadian Government does provide APAs, but they are not free of charge and are subject to a fee. APAs also do not prevent companies from having to undergo transfer price audits, but they can provide a level of protection and consistency in transfer pricing policies.

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